Bank charge reclaimers in hardship mistreated by banks

22 October 2009 / by Rachael Stiles

The Financial Ombudsman has reprimanded banks for ignoring the hardship of some customers trying to reclaim their bank charges, consumer revenge website MoneySavingExpert has reported.

Thousands of current account customers are awaiting the outcome of a court case to establish whether or not banks will have to repay millions of pounds in what the OFT has deemed 'unfair' charges for exceeding agreed overdrafts.

But, in the meantime, banks have been told that they should consider refunding those customers who are in financial hardship, which the banks have been failing to do, MoneySavingExpert.com has learned.

Reclaiming bank charges is on hold for everyone else until they are clarified by law, and banks are not obligated to deal with these claims until such a time, but the banks are breaking the rules by ignoring the claims of those in hardship.

There have been a number of reports on the MoneySavingExpert.com forum from customers who say their hardship was not taken into consideration by their bank, which the Ombudsman has reportedly confirmed and has subsequently stepped in, writing to all of the major current account providers, ordering them to comply.

The recession has seen an increase in the number of people reclaiming their bank charges on grounds of hardship, MoneySavingExpert says, which has helped those who have been successful in their claim to make ends meet.

Martin Lewis, creator of MoneySavingExpert.com, said: "We've seen a raft of complaints about banks replying with generic letters, playing runaround, using delaying tactics and ignoring people in dire need. It’s great to see the Ombudsman stepping in to try to change this."

He added that customers would not be in the situation they are in, where they are unable to have their claims heard, if the Financial Services Authority had not instigated a freeze on reclaiming, which it has kept renewing until the matter is settled.

Consequently, Mr Lewis said, "We're now in the bizarre scenario that even though two senior courts have ruled that fairness rules apply, banks can keep on charging, but most customers can't reclaim."

He added: "In truth, the Ombudsman doesn’t have the power to sort this. This is all about the FSA, which I believe has shot itself in the foot with this waiver, which was never structured to be in place for two-and-a-half years. The FSA should be investigating the fact banks are happy to play fast and loose with its rules, fine them for doing so and monitor how they operate, or stop the waiver altogether."

The British Bankers' Association has reacted strongly to MoneySavingExpert's criticism of the banks, claiming that while some of it is "admittedly, justified," it is also "misleading" the public by offering "a very partial account of the truth."

"The banks are committed (through the Banking Code) to working sympathetically and positively with customers to resolve their financial difficulties. And there is nothing in the Ombudsman letter to challenge this," the BBA said in a statement. "It is also a condition of the case on fees for unarranged overdrafts that banks process claims for those in financial hardship."

The banks believe they are satisfying this condition, the statement continues, and are being closely monitored by the Financial Services Authority to see that they do so.